The Group of 20 leading economies are focusing their efforts on protecting and creating jobs even as the global outlook deteriorates, without adding more debt to bloated public finances that have constrained recoveries around the world.
G20 labour ministers promised Tuesday to launch a task force on youth unemployment, after a report from the International Labour Organization and the Organization for Economic Co-operation Development said the world’s major economies remain 20 million jobs short of pre-crisis levels. The report warned that number could double next year.
The pledge came as economists told a House of Commons finance committee hearing that Ottawa must be flexible and open to altering its deficit-cutting plan if the shakier global landscape gets worse. Later in the day, Prime Minister Stephen Harper met with Finance Minister Jim Flaherty and Bank of Canada Governor Mark Carney, amid concern that European policy makers may not be able to contain the euro zone debt crisis and that the U.S. recovery is sputtering. “We’re in a world picture that is not so positive, and that clearly is going to demand that we spend a little bit of time looking at it,” Mr. Harper said before the meeting. “So we’re going to compare some notes.”
The Prime Minister’s spokesman, Andrew MacDougall, said the meeting was mainly for Mr. Harper to get a “de-brief” from the other men on the G20 meeting they attended last week in Washington.
“The economy is a concern for Canadians, and that’s why it’s important, I think, for Canadians to know that the Finance Minister, the Prime Minister and the Governor of the Bank of Canada are meeting to discuss these issues. Part of it is making sure that Canada, internationally, when these meetings happen, that we’re punching our weight and that we’re making the right interventions and advocating the right policies.”
None of the three men would comment after the meeting, which took place in Mr. Harper’s office in the Centre Block of Parliament Hill.
While it is not unheard of for central bank chiefs to be included in meetings with the Finance Minister and the Prime Minister, such gatherings are almost never publicized. Indeed, the message of economists in recent weeks has been that a return to recession, in Canada or globally, is less likely than a long stretch of slow growth, but the economy could slump further if public confidence in policy makers’ ability to keep the rebound going fades.
“Given Carney’s reputation, I think financial markets are certainly comforted by the notion that the Prime Minister would seek his counsel broadly on economic issues,” said Avery Shenfeld, chief economist at CIBC World Markets. “The announcement is unusual, but it likely reflects public concern that events around the world are changing, and that Ottawa needs to be paying attention to that in deciding where to go from here on fiscal policy.”
Opposition lawmakers, meanwhile, suggested the government was using the meeting to distract from what they called a confused message on economic policy.
Mr. Flaherty and Mr. Harper have stressed in recent days that while they intend to stay the course on balancing the budget by fiscal year 2014-15, they also will be “flexible” and do whatever is needed to shield Canada in the event of a massive economic shock from abroad.
“Their plan is completely incoherent,” Interim Liberal Leader Bob Rae told reporters Tuesday afternoon. “One day they’re preaching fiscal austerity . . . The next day they say they’re going to be flexible. I don’t think there’s a Canadian out there who has a clue as to what their real plan is.”
Economists at the finance panel Tuesday were divided on the likelihood of another downturn, but all agreed that the economic picture has darkened.
Glen Hodgson, chief economist at the Conference Board of Canada, said the government should be prepared to delay balancing the budget by a year or two if needed.
“Don’t just stick to the plan because you have a plan, think about the plan in the real-world context, where we’re having these extraordinary shocks from outside, and then do a course correction with the end plan still being in sight,” he said.
Douglas Porter, deputy chief economist at BMO Nesbitt Burns, stressed that Ottawa should be prepared to shift tack, even if that isn’t necessary just yet.
“I think it’s too early to significantly change tack at this point,” he said. “Having said that, we could have a rather dramatic change in the economy in the months ahead. I do believe the U.S. economy is in danger of a renewed downturn.”
With files from CP and Reuters